View more on these topics

Commission not yielding to disclosure

Five years of the disclosure regime have had little impact on IFA

commission, says a PIA report.

But it shows that personal pensions have been affected by the proposed 1

per cent cap on stakeholder which has caused char ges to fall by as much as

75 per cent. The trend in personal pensions is revealed by the drop in

reductions in yield. The RIY on a 25-year personal pension fell by 0.3 per

cent to 1.6 per cent between 1995 and 1999.

The industry believes the trend will be repeated across the personal

finance industry and have a knock-on effect on commission.

Sofa press spokesman Robert Reid says: “It is inevitable that stakehol der

will drive charges down and disclosure is the accidental beneficiary. But

the squeeze on margins means that the trend will not be restricted to

pensions in future.”

The report also shows that investors have seen small but continuous falls

in charges and expenses on other products, especially bigger-selling

products such as single-premium investment bonds.

The biggest improvement in RIYs was for 25-year mortgage endowments, with

the average RIY falling from 1.7 per cent in 1995 to 1.3 per cent in 1999.

Average RIYs on 10-year with-profits endowments have fallen from 3.4 per

cent to 3 per cent.

Despite falls in average RIYs, the range of charges across all products

offered by life insurers and fund managers remains wide. Charges can make

the most expensive pension plans worth half as much as the cheapest plans

in the early years.

The figures show that United Assurance&#39s unit-linked personal pension

would be worth £2,060 after five years compared with Direct Line&#39s £4,256

if £60 a month were contributed and both plans grew at 7 per cent.

The gulf narrows on maturity. After 25 years, United&#39s plan would be worth

£32,900 compared with £44,080 for Direct Line, provided both returned 7 per


But insurance analyst Ned Cazalet of Cazalet Financial Planning has

attacked the report. He says: “Because the report is historical, it does

not take into account the fact that many companies have recently dropped

endowments. It also does not account for the fact that stakeholder is

coming in.”

The report will be replaced by the FSA&#39s “real-time” comparative tables

next year.

PIA chairman Joe Palmer says: “The report helps consumers to identify

products and providers which maintain the right balance between good

investment performance and low charges and expenses.”

The report concludes that a greater proportion of tracker funds incur

lower charges so they meet the Cat standard for Isas.


Mass transfer pension peril

Some of the UK&#39s biggest pension providers offering high early transfervalue plans face losing billions of pounds as stakeholder makes its fullimpact.Those at greatest risk include household names such as Scottish Amicable,Scottish Equitable, Scottish Mutual and Standard Life.Under their obligation to give best advice, IFAs are compelled toinvestigate switching their clients from higher-charging pension policiesto […]

Small IFAs rate compliance as biggest burden

The training and compliance burden is a greater threat to small IFA firmsthan multi-ties or cuts to commission, according to small London IFAs.The research, by Equus Alliance, reveals that over 60 per cent of smalldirectly regulated IFAs consider training and compliance to be the majorthreats to their businesses.Less than 20 per cent of respondents consider […]

Call for the FSA monster to be tamed

Friends Provident is planning “best of sector” ethical funds in a bid to keep up with the widening appeal of socially responsible investment.The company says the move, due later this year, responds to the broadeningappeal of ethical investments which includes an increasingly wider mix ofconsumers.The new funds will invest in companies in any sector which […]

Julian Gibbs

At last, the technology sell-off has arrived – and not before time as manyshares were much overvalued. Such excellent shares as Baltimore, CMG, Sageand Logica are all 40 per cent or more off their year&#39s highs.Baltimore, for example, is 53 per cent off its 12-month high but is stillnine times its 52-week low.This is the […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm